Although new building projects have slowed significantly since the late 1990’s and early 2000’s, there is still a fair amount of development, particularly in the luxury end of the market.
For many of us dreaming of our first holiday property, buying something brand new that can be fitted, decorated and furnished to your own specifications can be very appealing. However, buying off plan can be a long, frustrating and complicated process in comparison to a typical resale property.
Given the enormous costs of building and materials, most developers try to sell as many properties as they can as early as possible, which in many cases is even before the construction works start. Such monies are then used to fund the construction project, which is typically more advantageous than borrowing from the bank with interest.
For those investing early, generous discounts are typically offered over the anticipated value of the property once completed and often the buyer can pay in stage-payments as the works progress. Getting in early also gives potential buyers their pick of the units in the best positions and with the best views. However, off-plan buyers are obviously speculating to an extent, as various problems can arise. For instance, the constructor could go bust and the works suspended, or the specification could change substantially to the point where the property is no longer desirable to the buyer.
Such potential problems can be minimised or offset to a large extent. This is again where a good lawyer will be worth their weight in gold. Proper checks of the filed plans and the associated applicable planning rules can help to rule out potential problems. In respect of the potential insolvency of the developer, most savvy buyers will insist on an ‘Aval Bancario’ (Bank Guarantee) whereby the developer’s bank will guarantee to the buyer’s deposit(s) paid in the event that the developer goes bust or doesn’t otherwise finish the project.
Some good news for off-plan buyers is that consumer law requires the developer to offer certain guarantees on new-build properties.
These include a 10 year guarantee for serious structural faults (e.g. supporting walls, foundations etc), a 3 year guarantee for minor structural faults (e.g. a leaking ceiling) and a 1 year guarantee for minor faults such as cracking plaster or badly aligned doors/windows.
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